Emeco Holdings Ltd (ASX: EHL) was one of the top performers in the market on Wednesday last week, and today it’s pushing higher again, up another 9%.
About Emeco
Founded in 1972, Emeco rents out mining equipment and machinery to companies and contractors mining coal, gold, copper, bauxite and iron ore. The total rental fleet is close to 1,000 machines.
Emeco also provides maintenance services through its subsidiaries Force Equipment and Matilda Equipment.
High Growth
The Emeco share closed around 14% higher on Wednesday last week after the company released guidance predicting 40% year-on-year EBITDA growth in FY19, as well as improved margins and a 20% return on capital.
By the end of the week, the share price had given up some of its gains, but one investment fund took this as a buying opportunity.
New Investment
The share price is likely pushing higher again today after an announcement was released after market close on Friday that Paradice Investment Management Pty Ltd, a manager of around $15 billion, had increased their existing position in Emeco. Paradice purchased more than five million shares after the guidance update, increasing their ownership to 9.047%.
While this news doesn’t affect the performance of the company directly, a large fund manager buying a significant stake will tend to boost the confidence of investors and, in turn, the share price.
Is Emeco a Buy?
Emeco has released positive guidance, but the real test will be whether they can maintain a high growth rate over the long term. In my view, that’s a tough ask for a company in such a cyclical industry.
I’d rather invest in one of the companies mentioned in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
